Report Faults Orchestra Officials on Deal for Rare Instruments

By DANIEL J. WAKIN

Published: December 18, 2004

Correction Appended

Officials at the New Jersey Symphony, driven by a fear of sabotaging a deal to purchase a rare string collection for its players, deceived their board and the public over the instruments' value, according to an internal report released yesterday.

But the report put a stamp of approval on the $18 million purchase of 30 violins, violas and cellos. It said the price was fair for a ''spectacular and unique collection'' that will adorn New Jersey and set the orchestra apart from its giant rivals in New York and Philadelphia. While acknowledging that the deal was not nearly as spectacular as the orchestra had made it seem, the authors said they would still support it.

''Good intentions, terrible process, good outcome,'' Bill Baroni, an author of the report and a member of the New Jersey State Assembly, said in summarizing the episode at a news conference.

The report, by Mr. Baroni and two other members of the orchestra's board, none of whom had played any role in the transaction, was commissioned after questions were raised about the authenticity of some of the instruments last summer. The collection's seller, Herbert J. Axelrod, a philanthropist and pet-care magnate, has been indicted on an unrelated tax fraud charge, casting additional shadows on the transaction.

It portrayed a board inexperienced in such large-scale, sophisticated purchases manipulated by a publicity-minded and shrewd negotiator, Mr. Axelrod.

''A financially challenged symphony based in Newark, N.J.,'' the report said, ''trying to buy 30 rare instruments from a quirky but generous millionaire with an all-volunteer group represented a once-in-a-lifetime deal in all respects.''

The purchase of the instruments, mostly made before 1750 by masters like Stradivari, Guarneri and Guadagnini, was announced in January 2003 with great fanfare. It was also credited with luring the noted conductor Neeme Jarvi to the orchestra as music director.

The instruments were appraised at $50 million, a number trumpeted by the orchestra in a lust for publicity to ''put itself on the map,'' the report said. The appraisal was a major source of the problem. It was made by Mr. Axelrod's main violin dealer. According to the report, the orchestra obtained informal opinions from other appraisers, although more complete valuations were not carried out because of the expense and because Mr. Axelrod was pressing for a quick sale. That was a mistake, it said.

At the time, the orchestra's appraisers put the value of the collection at between $15.3 million and $26.4 million. An instrument committee established to pursue the deal told the full board only about the upper-end appraisal, the report said -- another error.

''Many on the board were not even aware of that fact and were only aware of the seller's publicity that kept referring to a $50 million collection,'' the report said.

The report said doubts about the original Axelrod appraisal were hidden because the committee felt that if such word got out, Mr. Axelrod would be embarrassed and back out of the deal. That decision was wrong, the report said. The committee also worried that Mr. Axelrod would back out of forgiving a $4 million loan toward the purchase that he had given the orchestra.

At the same time, Mr. Axelrod was pressing for a fast deal, saying other potential buyers were keenly interested in the collection. Those claims later turned out to have been false. Members of the committee saw those accounts of other potential buyers as a negotiating tactic, but other board members took the claims at face value, the report said.

''Given the size of the transaction, there was too much concern to avoid conflict with the seller,'' the report said, ''and not enough to ensure that the board understood what it was getting for the money it was investing.''

When asked why the board did not check out the competition, Simon Woods, who became the orchestra's president in April, said: ''I think that's a great question. What I'm trying to do now is start a new era of transparency and accountability.''

In the end, Mr. Axelrod forgave $1 million and donated $1.1 million toward the collection's purchase. He thus ended up receiving only $15.9 million -- not far from the lowest evaluation, Mr. Woods said in an interview. The report recommended valuing the collection on the orchestra's books at $18 million. Mr. Woods said management agreed with that in principle but was waiting to hear the opinion of the orchestra's auditors.

The report gives a sense of the lust over the instruments when their purchase was being considered. Boston has the Pops and Tanglewood, the leadership felt, the Philadelphia Orchestra has its famed string sound, Chicago has its brass sound, ''but New Jersey would have 'all those Strads,''' the report recounted. Even now, the report recommended a public relations campaign to spread the word about the collection.

The committee also withheld information about refitting and changes to some instruments over the centuries, or different opinions about their authenticity, because the most important thing was the ''exceptional musical quality of the collection as a whole'' and what was called the instruments' playability. That, too, in hindsight, was a mistake, the report said.

Correction: December 21, 2004, Tuesday
An article in The Arts on Saturday about an internal report that said officials of the New Jersey Symphony had deceived their board and the public about the value of a collection of rare string instruments purchased for its players omitted credit for an earlier account of the report. The Star-Ledger of Newark published it on Friday.